Tesco: At last, some retail experience

Tesco sign Image copyright PA

To what is likely to be at least a partial sigh of relief among investors, Tesco announced today two new members of its board.

One, at least, has retail experience (though of a most particular type).

Before coming on to the new names (Richard Cousins, chief executive of Compass, and Mikael Ohlsson, the former chief executive of IKEA), it's worth considering who might make way for the new appointments.

I'm told that one of the names in the frame is Ken Hanna, who joined the board in 2009 and was formerly chief financial officer at Cadbury before it was taken over by Kraft.

As head of the audit committee - that's the group that is expected to ensure the business's accounts are in order - Mr Hanna is an important figure on the Tesco board.

It was his committee that considered the issues of "commercial income" last year.

Commercial income - how retailers account for payments from suppliers - is now at the heart of the inquiries sparked last month when Tesco admitted that its forecast profits had been overstated by £250m.

As I have reported before, the audit committee did receive what at least one investor described as a "warning" about commercial income last year.

Details were contained in the 2014 annual report published earlier this year.

"The committee notes that commercial income was an area of focus for the external auditors based on their assessment of gross risks," that document says.

"It is the committee's view that whilst commercial income is a significant income for the group and involves an element of judgement, management operates an appropriate control environment which minimises risks in this area.

"As a result, the committee does not consider that this is a significant issue for disclosure in its report."

At the moment, it appears that the focus of the inquiries by the Financial Conduct Authority, Deloitte and Freshfields is on activity in commercial income this year. So, the audit committee may have been quite right to reject the external auditor's concerns.

I am sure Tesco will also make it clear that plans for any changes to the board announced today and in the coming weeks began well before the £250m accounting controversy was announced.

New faces

What, then, of the new board appointments?

Although Mr Ohlsson has clear retail experience, much of it is in markets very different from the UK grocery market.

Investors, I am sure, would still like to see faces on the board that have cut their teeth in British retail.

Archie Norman, the former chief executive of Asda and now chairman of ITV, and Charles Wilson, formerly of Marks and Spencer and now at cash and carry turnaround, Booker, are two names that spring to mind.

At least one, Mr Norman, is being touted by some investors as a possible new chairman to replace Sir Richard Broadbent.

Mr Cousins' appointment is likely to be welcomed by investors.

He has turned the catering business Compass from one most associated with turkey twizzlers (remember Jamie Oliver once put the company in the headlines) to a firm which now provides high-end food services to the likes of Google and Chelsea Football Club.

If anyone knows about the intricacies of supplier relationships, it's Mr Cousins.

Dave Lewis, the new Tesco chief executive, will also be keen to hear how Compass changed its image from one dominated by its school canteens business to one now seen as a higher-quality food operator.

Tesco - marooned somewhere between cheap and cheerful and higher end offerings - could do with a similar refreshment programme.